A report says L.A. should rescind a 2012 law that scaled back pensions and hiked the retirement age of workers

An independent hearing officer Monday dealt a major setback to Los Angeles' effort to rein in public employee pension costs, concluding that elected officials violated labor law when they voted to roll back retirement benefits for new civilian workers without negotiating with labor leaders.

In a 28-page report, hearing officer Luella Nelson said the city's Employee Relations Board should order the City Council to rescind its 2012 law, which scaled back pensions and hiked the retirement age of workers hired after July 1, 2013, creating a second tier of employees.

The changes in benefits, proposed by then-Mayor Antonio Villaraigosa and later backed by the council, were supposed to have saved the city up to $4.9 billion over 30 years. The Coalition of L.A. City Unions, which represents an estimated 20,000 employees, filed an unfair labor practices challenge, arguing that the change could not be imposed unilaterally.

The five-member Employee Relations Board takes up Nelson's recommendation July 28. If it sides with the coalition, the pension reductions will be null and void for workers hired over the last year, union representatives said.

Monday's report "affirms our position … that the city needed to negotiate with the unions that represented the affected employees —and that the failure to do so is consequential," said Cheryl Parisi, the coalition's chairwoman.

Rob Wilcox, spokesman for City Atty. Mike Feuer, said the city's lawyers disagree with the hearing officer's findings and would submit paperwork opposing them for the board to consider at its next meeting.

Public employee pension costs have created huge stress on the city's budget in recent years. In departments supervised by the council, contributions for civilian employee retirement costs were expected to climb from $260 million in 2005 to $410 million in the fiscal year that starts July 1, according to City Administrative Officer Miguel Santana, the top budget official.

If the pension changes are struck down, Mayor Eric Garcetti and council members could find themselves negotiating reductions in pension costs at the same time they are also trying to reach salary agreements with an array of unions. Employment contracts with police officers, firefighters and the coalition were set to expire at midnight Monday.

Garcetti spokesman Jeff Millman had no comment, saying mayoral aides were still reviewing the hearing officer's report. Councilman Paul Krekorian, who heads the council's Budget and Finance Committee, also declined to discuss the findings.

A decision to strike down the changes in pension benefits is unlikely to have a major financial effect in the short term. Because the city is hiring only a limited number of new workers, budget officials expected savings in the first five years of only $30 million to $70 million. Savings were expected to grow significantly in the decades to follow.

Garcetti voted for the reduction in coalition pension benefits in September 2012 when he was still on the council. The council cast its vote just as former Mayor Richard Riordan was threatening to put a measure on the ballot to dramatically cut retirement benefits for existing city workers. That signature drive fizzled and the council's changes went into effect the next year.

Months later, Garcetti's opponent in the mayor's race, former City Controller Wendy Greuel, argued that the pension changes should have been the subject of collective bargaining. At the time, Garcetti said he was relying on the advice of the city's lawyers.

Coalition lawyers had argued that the mayor and council had a legal obligation to "meet and confer," or sit down in good faith and negotiate. Attorneys for the city said the changes did not need to be negotiated because they affected only future employees, not existing ones.

Nelson initially recommended that the Employee Relations Board reject the coalition's challenge last year, saying union leaders had waited too late to file it. The board rejected Nelson's findings last month and, on a 3-2 vote, reinstated the union challenge.

On Monday, Nelson sided with the coalition on its larger argument. She said the city's effort to draw a distinction between current and future employees had "crossed the thin line between 'novel' and 'frivolous.'"

The coalition was not the only union targeted for reductions in pension benefits. In 2011, voters approved a ballot measure trimming some retirement benefits for new police officers and firefighters. Last year, the union that represents most Department of Water and Power employees ratified a contract that pares back pensions for newly hired workers.